Publicis’ Revenue Dips 13%, As The Share Price Soars On The Better Than Expected Result

Publicis’ Revenue Dips 13%, As The Share Price Soars On The Better Than Expected Result
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Publicis Groupe has announced its organic revenue declined by 13 per cent year-on-year in the second quarter of 2020 due to the impacts of coronavirus.

Net revenue for the group grew 2.6 per cent to €2.3 billion ($A3.7 billion).

The French holding company was the first of the networks to reveal its financial results for the three months to June and with analysts expecting a 20 per cent drop, the results far exceeded expectations.

As a result the company’s share price shot up to €30.10 ($A49.16) when the stock market opened Thursday morning in Europe, having closed at €26.94 ($A44) the previous night – a rise of 11.7 per cent.

Highlights of the report included:

  • H1 reported net revenue at +9.7 per cent, EBITDA +4.3 per cent
  • H1 organic growth at -8.0 per cent, with Q2 at -13.0 per cent impacted by lockdowns
  • Solid tailwind in the US, leading to a limited organic decline of -3.3 per cent in H1
  • Resilient financials: Operating margin of 13 per cent, headline EPS of €1.75, free cash flow of €495 million ($A808 million)
  • Continued new business momentum

Publicis’ Australian operations are lumped in as APAC and revenues there were down 5.7 per cent year on year.

Publicis Groupe’s global organic revenue in the second quarter of 2020 was €2.29 billion ($A3.74 billion). However, this was offset after its US operations secured bug wins that included Disney and Bank of America.

Its European operations (France, Italy, Spain) posted a 23.5 per cent fall in like-for-like revenues. In North America these fell by 7.6 per cent.

Worldwide, net revenue for the group grew by 2.6 per cent in the second quarter to €2.3 million ($A3.76 million). While in Europe it declined 23.1 per cent to €510 million ($A833 million).

Publicis Groupe said the health division was the only area that recorded double-digit growth and that Europe was particularly affected because lockdown measures lasted for the vast majority of the second quarter.

Publicis Groupe CEO Arthur Sadoun issued a statement following the results acknowledging the difficutlies brought on by the coronavirus but added the company had the “strong fundamentals to weather the crisis”.

He added that Publicis Groupe’s business model of combining creative, media, data and technology has helped it to reduce the impact of CV-19.

Read Sadoun’s statement in full below:

The results we are publishing today demonstrate that Publicis has strong fundamentals to weather the crisis.

With our transformation almost completed, tailwind in the US and continued new business momentum, we were off to a good 2020.

As anticipated, we have been hit in Q2 by the first economic consequences of the coronavirus crisis. But thanks to our unique offer combining seamlessly creative, media, data and technology, to our unmatched backbone of shared services and our strong balance sheet, we have been able to reduce its impact.

Our reported net revenue was up 9.7% in H1 with the contribution of Epsilon.

Our organic growth in H1 came at -8.0% with Q2 at -13.0%, significantly better than the 23% decline in Global advertising expenditures predicted by Zenith and the 30% mentioned by WFA for Q2.

US organic growth was only down by -3.3% in H1, with Q2 at -6.8%, when ad spend is expected to decline by 18%. Our creative and media activities were still positive at the end of May. Europe posted an organic growth of -23.5% in Q2, as the lockdowns impacted most of the second quarter. In Asia, the performance was at -5.7% in Q2, with China clearly improving from Q1 but remaining negative and volatile.

Thanks to our ability to adapt fast, our country-model and our strong culture in managing costs, the Groupe demonstrated financial resilience in the first half, with an operating margin rate at 13.0%, despite the sudden drop in net revenue since March.

At the same time, we continued to record significant wins in new business across the world, such as Sephora in North America, McDonald’s in China, or Française des Jeux in France, demonstrating our ability to continue to win large pitches with our unique model.

There is no doubt that we will all have to live with the virus and its economic and social consequences for a while, but Publicis is well armed to weather this crisis.

First, we have the products and services that our clients need. Over the last few weeks, we have seen an increased demand for all the capabilities that drove our strategy in the last few years: first-party data, breakthrough creativity, digital-first media and technology. The crisis has clearly accelerated the relevance of our go-to-market. We are uniquely positioned to help our clients take back control over their customer relationship, deliver personalized experiences at scale and reduce their cost while increasing their sales.

Second, in a world where our structure needs to be flatter, agile and remote, we are now truly operating as a platform. Our shared service organization has proven its efficiency and we have finalized the implementation of our country model. This enabled us to react faster and immediately answer all our client needs in a seamless way. With the global roll-out of Marcel, 60,000 of our talents around the world now have a unique way to share their expertise, learn, collaborate, and contribute to client assignments.

Last but not least, we have a very solid financial backbone and a strong liquidity position that will get us through these uncertain times.

As we head into the second half, we are focusing on limiting the impact of the downturn, accelerating our new offering for our clients, while continuing to adapt our cost structure.

I would like to thank all of our clients for their trust as well as the Publicis’ teams around the world. They are our most precious asset and the ones who will drive our clients’ and our own future success. They have demonstrated outstanding commitment, solidarity, dedication and resilience despite the challenges they have endured, professionally and personally, during the lockdown.

 

 

 

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Arthur Sadoun Publicis Groupe

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